“On the one hand, we are called to play the Good Samaritan on life’s roadside, but that will be only an initial act. One day we must come to see that the whole Jericho Road must be transformed so that men and women will not be constantly beaten and robbed as they journey on life’s highway.”

Rev. Dr. Martin Luther King Jr.

Every day, thousands of families in Missouri struggle to stretch their wages across mounting bills. Times are tough, within our faith communities we are finding too many families who lack the income to meet their basic needs. In these difficult times, social service agencies, church emergency assistance funds, and food banks are all but tapped out. As the financial woes for our working families mount, many Missourians turn to high interest credit, like payday and car title loans, to meet their short term credit needs.

Payday loans are small, short-term loans that are secured by a borrower’s personal check. Payday loans typically cost $17 for every $100 borrowed and must be repaid in full before the borrower’s next payday—which translates to an annual percentage rate (APR) of 445% for a two-week loan, meaning that many borrowers pay more in fees than they actually borrow. For a “typical” payday loan in Missouri, a borrower completes eight back-to-back transactions before fully repaying an average loan of $300. This accrues $410 in interest fees.

These loans cause a predatory cycle of debt that traps our families into a spiral of recurring high interest fees. Exorbitant interest rates on payday loans ensnare our struggling families into spirals of debt so usurious that a $300 loan for the month’s groceries typically ends up costing our families a whopping $710.[1] With these rates, the average borrower pays more in interest than the original loan amount. The triple-digit interest rate is a product of the payday loan’s very unfair design: a loan that is due in full, plus interest and fees, in two short weeks and is secured by access to a family’s banking account.

These high cost loans don’t reflect the family values of our communities, and they dishonor the old adage that hard work and persistence create prosperity. Even individuals who are able to repay their astronomical payday and car title loan debts are unable to build credit as these lenders refuse to report positively to credit agencies. Small dollar, high interest borrowers are therefore trapped in a financial subclass that does not allow them to maintain income or build wealth.

There are now over one thousand payday lenders in Missouri, not to mention the hundreds of car title lenders and pawnshops. That’s more than McDonald’s and Starbucks combined. While these loans are marked as a short term fix for unexpected expenses, they tend to trap people in debt. Because the loans (and fees) are due in full within two weeks to a month, the borrower is forced to come up with a sizeable amount of cash in a short time.

Especially in these difficult economic times, we know that Missouri families deserve better. In order for lending to build assets in our communities, lending products must abide by a fair interest rate. As an interfaith community, we are building a grassroots base to outlaw the triple digit interest rates that cause the debt rap. Lowering the APR to a reasonable figure, like 36 percent APR can be accomplished by either lowering the fees charged, or by giving families more time to repay the loan. In either case, it means a family will be given a fighting chance to succeed, rather than being ensnared in a product that by its very terms makes it almost certain the family will fail.

This month as we celebrate the life and the legacy of Rev. Dr. Martin Luther King Jr, we are called to “transform the Jericho Road so that men and women and not constantly beaten and robbed along life’s highway.” The Jericho Road in Missouri is broken. Our rural, suburban, and city roads across the state run rampant with predatory lenders that charge triple digit interest, robbing our families of the wages they need to survive. Faith community efforts are critical to freeing our neighbors from the payday debt trap. Religious and community groups throughout the state are building a movement to Cap the Rate on these triple-digit interest products. Visit www.cco.org or www.moresponsiblelending.org to learn how you can get involved. Together, we can transform the Jericho Road.

[1] The average payday borrower in Missouri has 8 loans each year, most often taken out in back-to-back transactions. They therefore pay $48 in fees eight times, or $384, for what is essentially the original $290 line of credit. These data are from the Center for Responsible Lending.